Colin Hanna: Private equity is good for Pa.
Recent attacks on private equity funds have unwisely focused on a retirement fund for Pennsylvania’s Public School Employees (PSERS). Those unfounded criticisms intentionally ignore important facts — including how private equity investment consistently delivers the strongest returns for Pennsylvania retirees’ pensions.
Apparently, those who disparage PSERS investments place a higher value on political grandstanding than the best interests of taxpayers or the quality of life for public school retirees.
One must wonder what the real motivation is behind these baseless attacks. And why in the world are local politicians attacking an industry that consistently delivers double-digit returns for Pennsylvania retirees’ pensions?
In fact, PSERS and the Pennsylvania State Employees’ Retirement System(PennSERS) saw private equity return of 16.26% and 11.4%, respectively, net of fees. These strong returns helped increase the pensions for Pennsylvania teachers, firefighters and other public servants.
Without private equity investment, there would be some real concerns for Penn SERS. Its overall portfolio reported a 4.6% loss for the year. But private equity, with returns of 11.4%, was the only asset class besides cash to earn positive returns for the year.
And pensions across our country are benefiting from private equity investment. A recent study analyzed 165 U.S. public pension funds that represent more than 20 million public sector workers and retirees. It examined the investments and returns of America’s largest public pension funds and found that private equity is by far the best returning asset class in a public pension portfolio.
Private equity was found to have outperformed all other asset classes over the past seven years of the study. In 2018, private equity continued to provide strong return on investment, with a median annualized return of 10.2% over a 10-year period.
Additionally, private equity provides these real returns by making real investments in businesses across the country. They have proven time and again that they are improving the lives of millions of Americans each day. There are 167 private equity firms based in Pennsylvania. These firms own and operate entire companies with the goal of making them fiscally responsible and self-sufficient with the end result being a more stable economy.
All told, there are 974 private equity-backed business in Pennsylvania that employ almost 200,000 people. That’s more than $145 billion invested in the local communities since 2013.
Private equity drives economic growth and supports jobs while strengthening pensions for public servants across Pennsylvania. The recent attacks on the PSERS follow a national pattern to undermine capitalism and put all of us on the hook for higher taxes. Criticizing private equity for purely political gain is irresponsible, as it jeopardizes the quality of life for current and future retirees of Pennsylvania’s public-school employees. It also puts taxpayers on the hook for funds to cover a system that is currently working for everyone.
Private equity’s record is clear: This industry has invested billions to improve businesses in Pennsylvania, supports hundreds of thousands of Pennsylvania jobs and is strengthening the retirements of public workers while lessening the burden on taxpayers.